Millions face smaller Social Security checks next year as rising drug costs diminish payments
WASHINGTON (AP) — Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise.
The trustees who oversee Social Security are projecting there won't be a cost of living adjustment (COLA) for the next two years. That hasn't happened since automatic increases were adopted in 1975.
By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.
"I will promise you, they count on that COLA," said Barbara Kennelly, a former Democratic congresswoman from Connecticut who now heads the National Committee to Preserve Social Security and Medicare. "To some people, it might not be a big deal. But to seniors, especially with their health care costs, it is a big deal."
Cost of living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels.
Advocates say older people still face higher prices because they spend a disproportionate amount of their income on health care, where costs rise faster than inflation. Many also have suffered from declining home values and shrinking stock portfolios just as they are relying on those assets for income.
"For many elderly, they don't feel that inflation is low because their expenses are still going up," said David Certner, legislative policy director for AARP. "Anyone who has savings and investments has seen some serious losses."
About 50 million retired and disabled Americans receive Social Security benefits. The average monthly benefit for retirees is $1,153 this year. All beneficiaries received a 5.8 percent increase in January, the largest since 1982.
More than 32 million people are in the Medicare prescription drug program. Average monthly premiums are set to go from $28 this year to $30 next year, though they vary by plan. About 6 million people in the program have premiums deducted from their monthly Social Security payments, according to the Social Security Administration.
Millions of people with Medicare Part B coverage for doctors' visits also have their premiums deducted from Social Security payments. Part B premiums are expected to rise as well. But under the law, the increase cannot be larger than the increase in Social Security benefits for most recipients.
There is no such hold-harmless provision for drug premiums.
Kennelly's group wants Congress to increase Social Security benefits next year, even though the formula doesn't call for it. She would like to see either a 1 percent increase in monthly payments or a one-time payment of $150.
The cost of a one-time payment, a little less than $8 billion, could be covered by increasing the amount of income subjected to Social Security taxes, Kennelly said. Workers only pay Social Security taxes on the first $106,800 of income, a limit that rises each year with the average national wage.
But the limit only increases if monthly benefits increase.
Critics argue that Social Security recipients shouldn't get an increase when inflation is negative. They note that recipients got a big increase in January — after energy prices had started to fall. They also note that Social Security recipients received one-time $250 payments in the spring as part of the government's economic stimulus package.
Consumer prices are down from 2008 levels, giving Social Security recipients more purchasing power, even if their benefits stay the same, said Andrew G. Biggs, a resident scholar at the American Enterprise Institute, a Washington think tank.
"Seniors may perceive that they are being hurt because there is no COLA, but they are in fact not getting hurt," Biggs said. "Congress has to be able to tell people they are not getting everything they want."
Social Security is also facing long-term financial problems. The retirement program is projected to start paying out more money than it receives in 2016. Without changes, the retirement fund will be depleted in 2037, according to the Social Security trustees' annual report this year.
President Barack Obama has said he would like to tackle Social Security next year, after Congress finishes work on health care, climate change and new financial regulations.
Lawmakers are preoccupied by health care, making it difficult to address other tough issues. Advocates for older people hope their efforts will get a boost in October, when the Social Security Administration officially announces that there will not be an increase in benefits next year.
"I think a lot of seniors do not know what's coming down the pike, and I believe that when they hear that, they're going to be upset," said Sen. Bernie Sanders, an independent from Vermont who is working on a proposal for one-time payments for Social Security recipients.
"It is my view that seniors are going to need help this year, and it would not be acceptable for Congress to simply turn its back," he said.
The trustees who oversee Social Security are projecting there won't be a cost of living adjustment (COLA) for the next two years. That hasn't happened since automatic increases were adopted in 1975.
By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.
"I will promise you, they count on that COLA," said Barbara Kennelly, a former Democratic congresswoman from Connecticut who now heads the National Committee to Preserve Social Security and Medicare. "To some people, it might not be a big deal. But to seniors, especially with their health care costs, it is a big deal."
Cost of living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels.
Advocates say older people still face higher prices because they spend a disproportionate amount of their income on health care, where costs rise faster than inflation. Many also have suffered from declining home values and shrinking stock portfolios just as they are relying on those assets for income.
"For many elderly, they don't feel that inflation is low because their expenses are still going up," said David Certner, legislative policy director for AARP. "Anyone who has savings and investments has seen some serious losses."
About 50 million retired and disabled Americans receive Social Security benefits. The average monthly benefit for retirees is $1,153 this year. All beneficiaries received a 5.8 percent increase in January, the largest since 1982.
More than 32 million people are in the Medicare prescription drug program. Average monthly premiums are set to go from $28 this year to $30 next year, though they vary by plan. About 6 million people in the program have premiums deducted from their monthly Social Security payments, according to the Social Security Administration.
Millions of people with Medicare Part B coverage for doctors' visits also have their premiums deducted from Social Security payments. Part B premiums are expected to rise as well. But under the law, the increase cannot be larger than the increase in Social Security benefits for most recipients.
There is no such hold-harmless provision for drug premiums.
Kennelly's group wants Congress to increase Social Security benefits next year, even though the formula doesn't call for it. She would like to see either a 1 percent increase in monthly payments or a one-time payment of $150.
The cost of a one-time payment, a little less than $8 billion, could be covered by increasing the amount of income subjected to Social Security taxes, Kennelly said. Workers only pay Social Security taxes on the first $106,800 of income, a limit that rises each year with the average national wage.
But the limit only increases if monthly benefits increase.
Critics argue that Social Security recipients shouldn't get an increase when inflation is negative. They note that recipients got a big increase in January — after energy prices had started to fall. They also note that Social Security recipients received one-time $250 payments in the spring as part of the government's economic stimulus package.
Consumer prices are down from 2008 levels, giving Social Security recipients more purchasing power, even if their benefits stay the same, said Andrew G. Biggs, a resident scholar at the American Enterprise Institute, a Washington think tank.
"Seniors may perceive that they are being hurt because there is no COLA, but they are in fact not getting hurt," Biggs said. "Congress has to be able to tell people they are not getting everything they want."
Social Security is also facing long-term financial problems. The retirement program is projected to start paying out more money than it receives in 2016. Without changes, the retirement fund will be depleted in 2037, according to the Social Security trustees' annual report this year.
President Barack Obama has said he would like to tackle Social Security next year, after Congress finishes work on health care, climate change and new financial regulations.
Lawmakers are preoccupied by health care, making it difficult to address other tough issues. Advocates for older people hope their efforts will get a boost in October, when the Social Security Administration officially announces that there will not be an increase in benefits next year.
"I think a lot of seniors do not know what's coming down the pike, and I believe that when they hear that, they're going to be upset," said Sen. Bernie Sanders, an independent from Vermont who is working on a proposal for one-time payments for Social Security recipients.
"It is my view that seniors are going to need help this year, and it would not be acceptable for Congress to simply turn its back," he said.
If Washington would stop worry about putting food into the mouths of people in other countries America might be able to take care of these retired adults. And if they would stop giving aid to those crossing our borders there might be money for an increase. As usual, the government just can't run anything and keep in functioning for long periods of time. For most retired seniors it is all they have to look forward to and all they have to spend......Though never intended to be an only source of income for the retired they were duped into believing it was until a few years ago.........when most had already believed they could trust it. Doesn't the government plan ahead? Do they honestly think taxpayers can keep pulling money for taxes out of their a*****? Stop spending so much money overseas to care for others and take care of the wonderful Americans we have here!! They, like the veterans of America deserve SO MUCH MORE. They aren't getting the care they need and deserve.
The social security crunch in NOT new news. The fact that there would be no raises in social security next year was reported months ago.
ReplyDeleteIsn't it strange that now it is talked about even more, and written about even more,with Obamacare looming over our heads?
Good way to bend the senior citizens into Obama socialism. If the government would take care of these aging citizens properly they would be able to afford their medication and whatever else it takes for them to live happily and well. Obamacare isn't the way for them either.
this is what gets me
ReplyDeleteliberals say medicare, and medicaid or gov programs, they are not.
first and foremost the gov stole the money we paid in all our lives and used it for entitlement programs like welfare.
the money we are using for healthcare is OUR money, we paid it in and we'll never use it all yet the gov and the left keep throwing it up in the faces of the protesters like it's the governments money.
I have disability, my insurance is paid for by my money and it's a PRIVATE insurance co paid for by the money I paid in my whole life. with no interest like if I had banked it.
yet I still have to conform to gov regulations even though I'm paying.
the gov cannot effectively run anything. look at the VA